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Changes in flood insurance could impact homeowners

By Staff | May 8, 2014

The view from Kapalua Bay Villa 19 B1-2-3, a two-bedroom, three-bath unit available for $2,200,000.

The following information was provided by Title Guaranty Hawaii. To find further information, you may visit their website at www.tghawaii.com.

Some 13,850 Hawaii homeowners and businesses with federally subsidized flood insurance policies may soon witness double-digit rate hikes.

How could these changes affect me? Areas most affected are properties located in high-risk flood zones. However, all property owners may see premium increases or decreases as FEMA updates flood maps, adding more properties to the flood zones.

While new legislation signed into law allowing gradual increases over the next ten years will provide some relief, the adjusted premiums could mean the cost to live in coastal or flood-prone areas may increase by as much as 18-25 percent.

Tips to help sellers: 1) Include any positive flood insurance/flood risk features in the home listing; 2) Consider elevation among pre-sale improvement projects; and 3) Provide an Elevation Certificate to a buyer.

Tips to help buyers: 1) Check the flood insurance rate map to determine if a building is in a high-risk area (most lenders will require flood insurance in high-risk areas); 2) Request an Elevation Certificate from the seller; and 3) List a flood insurance quote as a contingency for purchase of a pre-FIRM building to ensure the buyer can afford ownership.

This just in from Dave DeLeon, government affairs director for the Realtors Association of Maui: Flood Insurance Rate Map, or FIRM, is prior to 1980 on Maui.

Effective May 1, 2014, all buyers of older properties (“pre-FIRM” prior to 1980 on Maui) will see a premium rate reduction under the Homeowner Flood Insurance Affordability Act of 2014.

Instead of jumping to “full cost” for flood insurance, buyers will assume the seller’s October 2013 rate for a pre-FIRM property.

NAR (National Association of Realtors) prevailed upon FEMA to implement this provision seven months early.

FEMA also extended the rate relief so all pre-FIRM properties (including the second homes and businesses) will begin paying October 2013 rates when they purchase or renew their flood insurance after May 1, including: ALL buyers of a pre-FIRM property, not just those whose seller has an existing policy; ALL recent owners who apply for a new flood insurance policy on a pre-FIRM property; ALL recent owners who reinstate an old pre-FIRM policy that previously lapsed for any reason; and ALL recent owners who renew a policy on a pre-FIRM property bought or newly insured after the 2012 Biggert-Waters law.

While expediting the rate relief, FEMA must still issue refunds to all those who paid more than their October 2013 rate.